Understanding the implications of January 2015 VAT changes for downloads on threshold for VAT registration
I run a UK private limited company that produces software for direct sale online (no reseller). At present, we're not VAT-registered.
The HMRC guidance (http://www.hmrc.gov.uk/vat/start/register/when-to-register.htm) says:
You don't need to include supplies you make in other countries when calculating your VAT taxable turnover for registration purposes - so leave out of your calculation any goods and services you supply where the place of supply is another country rather than the UK.
My understanding is that software sold online is considered to be a service rather than goods. As such, I think I'm correct in saying that the place of supply for my software is the UK under current rules for B2C sales (and is the purchaser's country for B2B, with the caveats of "use and enjoyment" rules).
However, the forthcoming changes in January 2015 will change the B2C rules so that the place of supply is the consumer's location.
As far as the £81,000 threshold is concerned for VAT registration, my working assumption is that I'll actually end up with more headroom under the threshold as a result of these changes since sales that would once have counted as UK sales for VAT purposes no longer will.
I'm also assuming that distance selling rules only apply to goods and not services, so I won't need to register to pay VAT in other countries if I tip the balance over their respective distance selling thresholds as a result of these changes.
Are my understanding and my assumptions all correct? Are there any other impacts I've not thought of?
Thanks in advance!
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